When the Great Recession hit back in 2008, I had just launched my own business after decades as an employee. If you, like me, were in business during that time, reading the news recently might give you a sense of déjà vu. Forecasts about mass corporate layoffs, dwindling job creation and other negative outlooks mean the sense of uncertainty that’s dogged us for the past few years isn’t going away any time soon.
With that in mind, I took a look at the advice I was giving to entrepreneurs back in 2008 and decided some of it is worth dusting off again.
First, none of us know what the future brings, but to be on the safe side, it’s best to start practicing smart cash management. That means looking out for the little things that can add up to big expenses over time. Recently on the Spike TV reality show Bar Rescue, bar/restaurant makeover expert Jon Taffer pointed out to one failing bar owner that if bartenders overpoured even a small amount in mixed drinks, that could add up to more than $100,000 in lost sales for the bar every year. Can any small business afford to give $100,000 away? I think not.
You may not own a bar, but no matter what industry you’re in, there are costs you can measure and that you’d better keep track of them if you want to keep your cash flow positive. For a restaurant owner, it might be the size of the side dishes your servers scoop out. For an ecommerce site, it might be the amount of packing material you put inside each shipment or the service that you use to ship your products to customers.
Figuring out what matters is the first step. The next step is measuring it. To do that, stay on top of your business’s finances. Weekly (or even daily) you should be running the numbers to see where your business stands at any point in time. Financial software like Quickbooks makes this easy to do. Even if your company has an accountant on staff, you should still be getting your hands dirty by tracking sales, income and outflow on a regular basis—it’s the only way to now where you stand.
When you find that too much is going out and not enough is coming in, look for ways to shave small savings off your costs. Enlist your employees to come up with money-saving ideas (and reward them when they do). A few suggestions to try:
- Talk to your insurance agent annually to review your coverage and make sure you’re not overpaying.
- In fact, review all your vendor accounts once a year. Is there another company that could do what your current suppliers do—better and cheaper?
- Utilities are a big expense for many small businesses. Talk to your energy company about getting a free audit—most will send someone out to observe your business and suggest energy-saving measures.
- Consider outsourcing tasks that don’t need to be done in-house. Often this can save substantially since you’re not paying employee benefits or payroll taxes.
- Cut back on business travel unless it’s essential; use conferencing tools like Skype or GoToMeeting instead.
- Institute e-billing (talk to your bank) to save your clients on postage and speed payments being deposited into your account.
These are just a few ideas to cut costs in your business. Your SCORE mentor can help you come up with others. Don’t have a mentor yet? Visit SCORE’s website to get matched with a mentor and get advice online 24/7.